The letter said there was “a lack of transparency regarding the source of the funds behind this acquisition”
A group of MPs and peers is calling for an inquiry into potential Chinese links to the funding of The Telegraph takeover deal. RedBird Capital, a US private equity firm, is set to acquire The Telegraph from RedBird IMI, an investment vehicle with majority United Arab Emirates backing, for £500 million.
It comes after RedBird IMI was blocked from taking full ownership of The Telegraph by the former government last year after a parliamentary outcry over press freedom. But in a letter to Lisa Nandy, the Culture Secretary, MPs and Lords from across the political spectrum have warned that the takeover could risk “potential Chinese state influence”.
The letter said there was “a lack of transparency regarding the source of the funds behind this acquisition”. It went on to argue that it was “conceivable, and increasingly likely, that funds could be sourced directly or indirectly from foreign state actors”, including China.
Signatories to the letter included Sir Iain Duncan Smith, the former Tory leader, Christine Jardine, a Liberal Democrat frontbencher, and Alex Sobel, a former Labour shadow minister. Tom Tugendhat, a former security minister, also put his name to the letter, which called for a “full and transparent investigation into the acquisition”.
The deal has not yet been finalised, but in the coming months it is expected to face regulatory investigation over its potential impact on the public interest in accurate news and free expression. The group of MPs said John Thornton, the chairman of RedBird Capital, is a member of the China Investment Corporation, a sovereign wealth fund that manages part of Beijing’s foreign exchange reserves.
The MPs claimed Thornton also took part in meetings with senior figures from the Chinese Communist Party last year and earlier this year. The 71-year-old retired as president of Goldman Sachs in 2003 in order to become a professor at Tsinghua University, one of China’s leading universities. Goldman Sachs said at the time that he would stay on as a senior adviser to the bank, with a particular focus on Chinese clients and strategy.
A press release issued by the Chinese government in April said He Lifeng, a senior Chinese official, had met Mr Thornton to “exchange views on China-US economic and trade relations and [the] macroeconomic situation”. The release said Thornton had “[noted] that US-China relations are very important” and that he would “continue to play a role in… promoting the stability of the relations between the two countries”.
Thornton also has long-standing links to Britain, having served on the board of BSkyB when the satellite broadcaster was controlled by Rupert Murdoch.
RedBird sources said there was no Chinese state cash in its funds. However, the firm is likely to face questions about whether it has raised money from private Chinese private investors who may be under the influence of Beijing. These matters are likely to be scrutinised by Ofcom, the media regulator, if and when RedBird presents a finalised takeover deal.
The precise sources of the capital the firm intends to use may prove difficult to uncover, however, as private equity firms typically sign binding confidentiality agreements with their backers, known as Limited Partners.
RedBird may instead be asked to provide legally binding assurances that its fund does not include sovereign wealth. Gerry Cardinale, the firm’s founder, is currently in talks to add minority investors to an ownership consortium, including Lord Rothermere, the owner of the Daily Mail.
However, no final agreements are in place and a rival is attempting to disrupt the sale, presenting itself as the “British bid”. A number of regulatory hurdles also await. Leonard Blavatnik, one of Britain’s richest men, and the owner of the major record label Warner Music and the sports streaming service Dazn, is also in discussions to take a minority stake in The Telegraph, Sky News first reported.
Born in Ukraine, Leonard made his fortune in the commodities industry after the fall of the Soviet Union. The 67-year-old is now a leading global media investor, with assets also including the film producer behind The Brutalist, and an Israeli television channel.
Cardinale announced an agreement in principle to acquire The Telegraph on May 23. He is unlikely to present a finalised deal until the law governing foreign state investment in newspapers is itself finalised. Under proposals by Nandy, the UAE media investment company IMI would be allowed to retain a 15 per cent passive stake in The Telegraph. Her plans have been complicated by an apparent loophole in the planned legislation that could allow multiple foreign states to acquire 15 per cent each.
Conservative and cross-bench peers have demanded that Ms Nandy closes the loophole, threatening to block her proposals when they are debated in the House of Lords next month.
The Government is said to be keen to avoid further delays as it attempts to repair relations with the UAE, which took great offence at the decision to block the RedBird IMI takeover. Cardinale said last month: “This transaction marks the start of a new era for The Telegraph as we look to grow the brand in the UK and internationally, invest in its technology and expand its subscriber base. “We believe the UK is a great place to invest, and this acquisition is an important part of RedBird’s growing portfolio of media and entertainment companies in the UK.”
RedBird has said it hopes The Telegraph will be able to reinvest more of its profits and become a force in US and global journalism.
Foreign state ownership of newspapers was banned outright last year following a cross-party outcry. While RedBird IMI does not currently control The Telegraph, it is the owner of debt secured against it.
